VIDEO: Ignore What Customers Say; Watch What They Do

CNBC has a great video on innovation that struck a chord with me.

It is among a five-part Business of Innovation series hosted by Maria Bartiromo.

Roger Schank, the former head of Yale's computer science department, forcefully tells viewers that:

• Market research is the worst way to learn what customers want
• Surveys can't determine the real demand for products or services that don't yet exist
• Observation is everything

A central aspect of disruptive innovation is that listening to your best customers will never allow your organization to create game-changing innovations.

A few weeks ago, I was invited to deliver a lecture to a group of managers in an executive MBA class.  In the class, a former telephone company executive echoed this very same point: Back in the early 1980s, landline telephone companies dramatically underestimated the size of the cellular market (a few thousand subscribers, perhaps) because they could not perceive how mobile phones would evolve or how consumer needs would change.

This is not to brand telcos as foolish as much as it is to understand how people deal with the unknown.

Great new growth businesses almost always look smaller and less attractive to incumbent suppliers than their current business. Smart startups pursue these opportunities because they have small cost structures and they are not locked into what mainstream customers say they want.

The key to successful disruptive innovation is to allow an organization to selectively adopt some of the processes and priorities that work so well for startups. (Here are some management tools to help do this: RPV Competitive Analysis tool (pdf) and Disruption Brainstorm Tool (pdf).)

Although disruptive innovation is considered by many to be synonymous with technology breakthroughs, Schank warns against this narrow approach. Customers ask a different question, he says. "The answer is not the technology. The answer is did I get what I wanted?"

  Epsiodes available online include guest Howard Putnam, former CEO of Southwest Airlines and Larry Huston, former VP of Procter & Gamble. Upcoming episodes include interviews with Andrea Illy, CEO of Illy Coffee, and skateboard king Tony Hawk.

**Other Sources**

Endless Innovation looks at the  third episode.

Retired investor Joey Ramone on Maria Bartiromo: